Reliance Infra Aims to Bag 10% of Highway Projects

Co hopes to achieve financial closure for its entire portfolio of 25 infra projects by end of this financial year

 Anil Dhirubhai Ambani Group's flagship infrastructure company Reliance Infrastructure expects revenue from toll roads to jump and hopes to bag 10% of highway projects worth up to 80,000 crore that are likely to be awarded every year, chief executive officer Lalit Jalan told ET. The company aims to achieve financial closure for its entire portfolio of 25 infrastructure development projects worth 40,000 crore by the end of this fiscal year. As a contractor, it sees internal projects driving growth, said Mr Jalan, whose company has emerged as an infrastructure major after the transfer of its power projects to group company Reliance Power.
Despite regulatory issues and fierce competition from Tata Power Company in the distribution business in Mumbai, the company maintains that its competitive edge will ensure that the business would continue to be a "cash cow", he said.
"If you open up the Mumbai power distribution area to others, as it is already opened to the Tatas, it is ok. But the competition has to be on a level-playing field," Mr Jalan said. "Today, my rich customers are subsidising my poor customers. If this cross subsidy was not there, then it would be free competition," he added.
Maharashtra Electricity Regulatory Commission (MERC) has invited bids for power distribution licence for Mumbai as R-Infra's licence expires in August. The state's power regulator is believed to be considering either giving the licence to one entity or dividing the area among several distributors. "I love competition. I want competition in Mumbai because I am the most competitive in terms of cost. Why should I be scared," the CEO said.
The company is also upbeat about road projects. "We are expecting 70,000-80,000 crore of road projects to be bid out every year. We are looking for about 10% share of this," Mr Jalan said.
With 11 road projects worth about 12,000 crore covering 970 km in its kitty, R-Infra expects revenue from the business to rise to 1,000 crore by 2011-12 from around 25 crore reported in 2009-10.
"I will have five projects generating revenue by the end of this financial year, and 10 by end of FY12," he said. The company is executing the National Highways Authority of India's (NHAI) projects under the public-private partnership (PPP) model and would earn revenue from toll collected from traffic.
Some section of the equity analysts community has expressed concern that the traffic on some of the road projects awarded by NHAI may be lower than expectation as developers had placed aggressive bids to bag projects.
"Not my projects. I am very confident of beating the traffic projection on which I bid," Mr Jalan responded to the concerns. "We have had double-digit growth in traffic across our three operational projects. I think 8-10% growth is very reasonable on an annual basis," he substantiated.
As a contractor, R-Infra aims to focus on projects being developed by ADAG to drive its 24,000 crore order book. The company aims revenue of 4,000 crore from contracting business in 2010-11.
"I don't have an appetite to do internal as well as external projects. So I am focusing on internal projects as it makes us cost competitive and also, we get the safety of getting payments in time," Mr Jalan said. He is not perturbed by the risk involved in high exposure to internal project or by the likely delay in projects of Reliance Power due to financing issues. "I don't foresee any slowdown in Reliance Power's projects. They have enough equity and debt is available."
"Execution is our biggest challenge," Mr Jalan said. He believes that timely and costeffective execution of projects would be crucial for the company. However, he dismisses analysts' concerns over the company's project execution capability, saying that all projects of the company are on schedule.
Co Sees Internal Projects Driving Growth

• Reliance Infra maintains that its
competitive edge will ensure that the power infrastructure business would continue to be a "cash cow"

• R-Infra expects revenue from the road
projects business to rise to 1,000 crore by 2011-12 from around 25 crore reported in 2009-10

• Co has 11 road projects worth around
12,000 crore, covering 970 km, in its kitty

• R-Infra aims to focus on projects being
developed by ADAG to drive its 24,000-crore order book

• R-Infra aims revenue of 4,000 crore
from contracting business in 2010-11